Stimulus Plan Has Much To Like For Energy Companies
President Obama today signed the American Recovery and Reinvestment Act of 2009 which provides $789 billion in tax breaks and new spending as part of an effort to stimulate the U.S. economy.
A substantial portion of the funds—at least $50 billion—are to be directed toward the energy industry via tax incentives, loan guarantees, renewable energy bonds and direct spending. Most of the funds are specifically directed toward renewable energy, energy efficiency and conservation, transmission, and advanced energy technology.
Details on these energy-related provisions follow.
Tax incentives for renewables.
Production tax-credit extension. The Act extends the in-service placement deadline for facilities that are eligible for the Renewable Electricity Production Tax Credit. For wind facilities, the deadline is extended to January 1, 2013. For closed and open-loop biomass, geothermal, solar, landfill gas, trash, qualifying hydro, marine and hydrokinetic facilities, the deadline is extended to January 1, 2014.
Option to elect investment tax credit instead of production tax credit. In lieu of claiming the PTCs, qualifying facilities can elect to claim the Investment Tax Credit—equal to 30% of the taxpayer’s basis in such property. To qualify, the facilities must meet the same in-service placement deadlines as under the PTC provision.
Option to elect Department of the Treasury grant instead of tax credits. The Act contains a short-term provision for receiving renewable energy grants from the Department of Treasury instead of the PTC or ITC. To qualify, the renewable energy property must be 1. placed in service in 2009 or 2010 or 2. placed in service after 2010, provided that construction is started in 2009 or 2010 and the project is in-service before January 1, 2013, if a wind facility and before January 1, 2014, if a qualified non-wind facility. The credit equals 30% of the basis of wind, biomass, geothermal, qualified hydro, landfill gas, waste-to-energy, marine and hydrokinetic facilities, as well as qualified fuel cell, solar and qualified small wind energy properties. The credit equals 10% of the basis of geothermal, qualified micro turbine, combined heat and power, and geothermal heat pump properties.
Removal of certain limitations on credits for renewable energy projects. The Act removes the $4,000 cap on the 30% tax credit for qualified small wind energy properties as well as the limitation that reduced the ITC for projects receiving government-subsidized financing.
Loan guarantees and bonds for renewables, transmission and energy conservation.
Innovative Technology Loan Guarantee Program. The Act provides an additional $6 billion for the Innovative Technology and Loan Guarantee Program which was part of the Energy Policy Act of 2005, directed towards renewable energy, transmission and leading-edge biofuel projects for which construction is commenced no later than September 30, 2011. Up to $500 million can be used for biofuel projects that are likely to become commercial technologies and to reduce life-cycle greenhouse gas emissions.
Increased limitation on issuance of new CREBs and ECBs. An additional $1.6 billion is authorized for Clean Renewable Energy Bonds to fund wind, biomass, geothermal, small irrigation, landfill gas, marine and trash combustion facilities. An additional $2.4 billion is authorized for Energy Conservation Bonds to fund government-level initiatives and green community programs focused on the reduction of greenhouse gas emissions.
Direct spending on renewables, efficiency, transmission and clean coal.
The Act provides for billions of dollars in direct spending by the Department of Energy, including:
$16.8 billion for renewable energy and energy efficiency, including $6.3 billion in grants to state, local and tribal governments for energy efficiency and conservation programs (part of which is conditioned upon implementing policies that align utility incentives with customer energy conservation), $5 billion for home-weatherization assistance for modest-income households, and $2 billion for grants for the manufacturing of advanced batteries.
$4.5 billion for electricity delivery and energy reliability to modernize the nation’s electricity grid, enhance the reliability of energy infrastructure, and develop and implement smart grid technologies, with additional funds and borrowing authority for transmission improvements by the Bonneville and Western Area Power Administrations.
$3.4 billion for fossil energy research and development. In earlier versions of the stimulus bill, substantial portions of this money were allocated specifically to funding clean coal projects, carbon capture and sequestration projects, and one or more zero-emission power plants.